10-Q 1 hubg-20240331.htm 10-Q 10-Q
--12-31Q1false00009409420000940942srt:MaximumMemberhubg:EquipmentNotesDueTwoThousandTwentyNineMember2024-03-310000940942us-gaap:CommonStockMember2024-01-012024-03-310000940942hubg:CreditAgreementMember2022-02-280000940942hubg:LogisticsMember2023-01-012023-03-310000940942hubg:ForwardAirFinalMileAcquisitionMember2023-12-202023-12-200000940942us-gaap:CommonClassAMember2024-03-310000940942hubg:EquipmentNoteDueTwoThousandTwentySevenMember2024-03-310000940942hubg:EquipmentNotesDueTwoThousandTwentyFourMember2023-12-310000940942srt:MaximumMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberhubg:CreditAgreementMember2022-02-282022-02-280000940942us-gaap:StandbyLettersOfCreditMember2023-12-310000940942us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberhubg:CreditAgreementMember2022-02-282022-02-280000940942hubg:EquipmentNotesDueTwoThousandTwentyNineMember2024-03-310000940942us-gaap:RetainedEarningsMember2023-12-310000940942us-gaap:CommonClassAMember2023-12-310000940942hubg:EquipmentNoteDueTwoThousandTwentySixMemberhubg:EquipmentNotesCommencingOnTwoThousandTwentyOneMember2024-01-012024-03-310000940942us-gaap:CommonStockMember2022-12-310000940942srt:MinimumMemberhubg:EquipmentNoteDueTwoThousandTwentyFiveMember2024-03-310000940942srt:MinimumMemberhubg:EquipmentNoteDueTwoThousandTwentySixMember2024-03-310000940942us-gaap:LetterOfCreditMembersrt:MinimumMember2022-02-282022-02-280000940942us-gaap:TreasuryStockCommonMember2024-01-012024-03-310000940942hubg:CreditAgreementMember2024-01-012024-03-310000940942us-gaap:BaseRateMemberhubg:CreditAgreementMembersrt:MinimumMember2022-02-282022-02-280000940942hubg:EquipmentNotesDueTwoThousandTwentyFourMemberhubg:EquipmentNotesCommencingOnTwoThousandTwentyMember2024-01-012024-03-310000940942hubg:EquipmentNoteDueTwoThousandTwentySevenMember2023-12-3100009409422023-03-310000940942hubg:EquipmentNotesCommencingOnTwoThousandSeventeenMemberhubg:EquipmentNotesDueTwoThousandTwentyFourMember2024-01-012024-03-310000940942us-gaap:TreasuryStockCommonMember2023-12-310000940942us-gaap:TreasuryStockCommonMember2022-12-310000940942hubg:FixedRateBorrowingsMember2023-01-012023-12-310000940942hubg:EquipmenntNoteDueTwoThousandTwentyEightMember2024-01-012024-03-310000940942hubg:EquipmentNotesDueTwoThousandTwentyNineMember2024-01-012024-03-310000940942hubg:FixedRateBorrowingsMember2023-12-310000940942us-gaap:CommonStockMember2023-12-310000940942us-gaap:BaseRateMembersrt:MaximumMemberhubg:CreditAgreementMember2022-02-282022-02-280000940942us-gaap:StandbyLettersOfCreditMember2024-03-310000940942us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310000940942hubg:CreditAgreementMember2024-03-310000940942us-gaap:AdditionalPaidInCapitalMember2024-03-310000940942us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310000940942hubg:EquipmenntNoteDueTwoThousandTwentyEightMember2023-12-3100009409422023-01-012023-03-310000940942hubg:EquipmentNotesDueTwoThousandTwentyFourMemberhubg:EquipmentNotesCommencingOnTwoThousandNineteenMember2024-01-012024-03-310000940942us-gaap:AdditionalPaidInCapitalMember2022-12-310000940942us-gaap:CommonClassBMember2024-03-310000940942us-gaap:RetainedEarningsMember2024-03-310000940942us-gaap:CommonStockMember2023-03-310000940942us-gaap:RetainedEarningsMember2023-03-310000940942hubg:EquipmentNoteDueTwoThousandTwentyFiveMember2024-01-012024-03-310000940942hubg:EquipmentNotesDueTwoThousandTwentyFourMember2024-03-310000940942hubg:EquipmentNotesDueTwoThousandTwentyNineMemberhubg:EquipmentNotesCommencingOnTwoThousandTwentyFourMember2024-01-012024-03-310000940942us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberhubg:CreditAgreementMembersrt:MinimumMember2022-02-282022-02-280000940942hubg:CreditAgreementMember2022-02-282022-02-280000940942hubg:FixedRateBorrowingsMember2024-01-012024-03-310000940942us-gaap:CommonStockMember2024-03-310000940942hubg:EquipmentNoteDueTwoThousandTwentyFiveMember2023-12-310000940942hubg:EquipmentNoteDueTwoThousandTwentySevenMember2024-01-012024-03-310000940942hubg:EquipmentNoteDueTwoThousandTwentySevenMemberhubg:EquipmentNotesCommencingOnTwoThousandTwentyThreeMember2024-01-012024-03-310000940942us-gaap:StandbyLettersOfCreditMember2024-01-012024-03-310000940942us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310000940942us-gaap:BaseRateMembersrt:MaximumMember2022-02-282022-02-280000940942srt:MaximumMemberhubg:EquipmentNoteDueTwoThousandTwentySixMember2024-03-310000940942hubg:EquipmentNotesCommencingOnTwoThousandTwentyTwoMemberhubg:EquipmentNoteDueTwoThousandTwentySevenMember2024-01-012024-03-310000940942us-gaap:AdditionalPaidInCapitalMember2023-03-310000940942hubg:EquipmentNotesDueTwoThousandTwentyNineMembersrt:MinimumMember2024-03-310000940942hubg:EquipmentNoteDueTwoThousandTwentyFiveMember2024-03-310000940942hubg:EquipmentNoteDueTwoThousandTwentySevenMembersrt:MinimumMember2024-03-310000940942hubg:EquipmenntNoteDueTwoThousandTwentyEightMemberhubg:EquipmentNotesCommencingOnTwoThousandTwentyThreeMember2024-01-012024-03-310000940942us-gaap:CommonClassBMember2024-04-260000940942hubg:ForwardAirFinalMileAcquisitionMember2023-12-200000940942hubg:FixedRateBorrowingsMember2024-03-310000940942us-gaap:TreasuryStockCommonMember2023-03-310000940942hubg:EquipmentNoteDueTwoThousandTwentySixMember2024-01-012024-03-310000940942us-gaap:CommonClassBMember2023-12-310000940942us-gaap:BaseRateMembersrt:MinimumMember2022-02-282022-02-280000940942hubg:EquipmenntNoteDueTwoThousandTwentyEightMember2024-03-310000940942hubg:IntermodalMember2024-01-012024-03-310000940942hubg:InterSegmentMember2024-01-012024-03-310000940942hubg:EquipmenntNoteDueTwoThousandTwentyEightMembersrt:MinimumMember2024-03-3100009409422022-12-310000940942us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310000940942us-gaap:FederalFundsEffectiveSwapRateMemberhubg:CreditAgreementMember2022-02-282022-02-280000940942srt:MaximumMemberhubg:EquipmentNoteDueTwoThousandTwentySevenMember2024-03-3100009409422024-03-310000940942hubg:EquipmentNoteDueTwoThousandTwentySixMember2023-12-310000940942hubg:EquipmentNoteDueTwoThousandTwentySixMember2024-03-3100009409422023-12-310000940942us-gaap:TreasuryStockCommonMember2023-01-012023-03-310000940942hubg:ForwardAirFinalMileAcquisitionMemberhubg:DevelopedTechnologyMember2024-03-310000940942us-gaap:AdditionalPaidInCapitalMember2023-12-310000940942hubg:EquipmentNotesDueTwoThousandTwentyFourMembersrt:MinimumMember2024-03-310000940942hubg:CreditAgreementMember2023-12-310000940942hubg:EquipmentNotesDueTwoThousandTwentyFourMember2024-01-012024-03-310000940942hubg:InterSegmentMember2023-01-012023-03-310000940942hubg:EquipmentNotesCommencingOnTwoThousandTwentyMemberhubg:EquipmentNoteDueTwoThousandTwentyFiveMember2024-01-012024-03-310000940942us-gaap:CustomerRelationshipsMemberhubg:ForwardAirFinalMileAcquisitionMember2024-03-310000940942hubg:ForwardAirFinalMileAcquisitionMember2024-03-310000940942srt:MaximumMemberhubg:EquipmenntNoteDueTwoThousandTwentyEightMember2024-03-310000940942us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000940942us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310000940942hubg:EquipmentNotesDueTwoThousandTwentyNineMember2023-12-3100009409422024-02-220000940942us-gaap:RetainedEarningsMember2024-01-012024-03-310000940942us-gaap:CommonClassAMember2024-04-260000940942hubg:LogisticsMember2024-01-012024-03-310000940942hubg:IntermodalMember2023-01-012023-03-310000940942us-gaap:RetainedEarningsMember2023-01-012023-03-310000940942us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310000940942srt:MaximumMemberhubg:EquipmentNoteDueTwoThousandTwentyFiveMember2024-03-310000940942us-gaap:RetainedEarningsMember2022-12-310000940942us-gaap:TreasuryStockCommonMember2024-03-310000940942hubg:ForwardAirFinalMileAcquisitionMember2024-01-012024-03-310000940942srt:MaximumMemberhubg:EquipmentNotesDueTwoThousandTwentyFourMember2024-03-310000940942srt:MaximumMemberus-gaap:LetterOfCreditMember2022-02-282022-02-280000940942us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310000940942hubg:ChoptankTransportLlcMember2024-01-012024-03-3100009409422024-01-012024-03-310000940942hubg:TwoThousandAndTwentyThreeShareRepurchaseProgramMemberus-gaap:CommonClassAMember2023-10-31hubg:Segmenthubg:Operatorsxbrli:purexbrli:shareshubg:Containershubg:Tractorshubg:Driversiso4217:USDhubg:Trailersiso4217:USDxbrli:shareshubg:Carrier

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-27754

 

HUB GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

36-4007085

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

2001 Hub Group Way

Oak Brook, Illinois 60523

(Address, including zip code, of principal executive offices)

(630) 271-3600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

 

HUBG

 

NASDAQ

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

 

Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company Emerging Growth Company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

On April 26, 2024, the registrant had 61,741,180 outstanding shares of Class A common stock, par value $.01 per share, and 574,903 outstanding shares of Class B common stock, par value $.01 per share.

 

 


 

HUB GROUP, INC.

TABLE OF CONTENTS

 

 

Page

PART I. Financial Information:

 

Item1. Financial Statements

 

Condensed Consolidated Balance Sheets – March 31, 2024 (unaudited) and December 31, 2023

3

Unaudited Condensed Consolidated Statements of Income and Comprehensive Income – Three Months Ended March 31, 2024 and 2023

4

Unaudited Condensed Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2024 and 2023

5

Unaudited Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2024 and 2023

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

Item 3. Quantitative and Qualitative Disclosures about Market Risk

17

Item 4. Controls and Procedures

17

PART II. Other Information

17

Item 1. Legal Proceedings

17

Item 1A. Risk Factors

17

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

17

Item 3. Defaults Upon Senior Securities

18

Item 4. Mine Safety Disclosures

18

Item 5. Other Information

18

Item 6. Exhibits

18

 

 

2


 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

HUB GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

ASSETS

(unaudited)

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

$

195,362

 

 

$

187,270

 

Accounts receivable trade, net

 

588,957

 

 

 

600,197

 

Accounts receivable other

 

4,940

 

 

 

3,358

 

Prepaid taxes

 

10,078

 

 

 

17,331

 

Prepaid expenses and other current assets

 

28,621

 

 

 

41,089

 

TOTAL CURRENT ASSETS

 

827,958

 

 

 

849,245

 

 

 

 

 

 

 

Restricted investments

 

20,393

 

 

 

20,763

 

Property and equipment, net

 

777,209

 

 

 

791,692

 

Right-of-use assets - operating leases

 

209,171

 

 

 

210,742

 

Right-of-use assets - financing leases

 

2,152

 

 

 

2,522

 

Other intangibles, net

 

295,943

 

 

 

304,607

 

Goodwill

 

735,460

 

 

 

733,695

 

Other non-current assets

 

22,984

 

 

 

22,781

 

TOTAL ASSETS

$

2,891,270

 

 

$

2,936,047

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts payable trade

$

320,919

 

 

$

349,378

 

Accounts payable other

 

18,179

 

 

 

14,471

 

Accrued payroll

 

31,964

 

 

 

21,731

 

Accrued other

 

126,475

 

 

 

121,253

 

Lease liability - operating leases

 

45,775

 

 

 

44,690

 

Lease liability - financing leases

 

1,253

 

 

 

1,579

 

Current portion of long-term debt

 

104,035

 

 

 

105,108

 

TOTAL CURRENT LIABILITIES

 

648,600

 

 

 

658,210

 

 

 

 

 

 

 

Long-term debt

 

230,775

 

 

 

245,574

 

Other non-current liabilities

 

52,932

 

 

 

55,287

 

Lease liability - operating leases

 

175,481

 

 

 

177,699

 

Lease liability - financing leases

 

823

 

 

 

865

 

Deferred taxes

 

160,443

 

 

 

163,767

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2024 and 2023.

-

 

 

-

 

Common stock

 

 

 

 

 

Class A: $.01 par value; 97,337,700 shares authorized; 72,303,228 shares issued in 2024 and 75,524,189 shares issued in 2023; 61,847,444 shares outstanding in 2024 and 62,200,921 shares outstanding in 2023.

 

723

 

 

 

755

 

Class B: $.01 par value; 662,300 shares authorized; 574,903 shares issued and outstanding in 2024 and 2023.

 

6

 

 

 

6

 

Additional paid-in capital

 

208,964

 

 

 

209,830

 

Retained earnings

 

1,968,361

 

 

 

1,949,110

 

Accumulated other comprehensive loss

 

(137

)

 

 

(129

)

Treasury stock; at cost, 10,455,784 shares in 2024 and 13,323,268 shares in 2023.

 

(555,701

)

 

 

(524,927

)

TOTAL STOCKHOLDERS' EQUITY

 

1,622,216

 

 

 

1,634,645

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,891,270

 

 

$

2,936,047

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

3


 

HUB GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

 

 

 

 

 

 

Operating revenue

$

999,493

 

 

$

1,152,265

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Purchased transportation and warehousing

 

740,172

 

 

 

866,931

 

Salaries and benefits

 

144,497

 

 

 

137,431

 

Depreciation and amortization

 

38,331

 

 

 

35,449

 

Insurance and claims

 

12,618

 

 

 

12,683

 

General and administrative

 

27,234

 

 

 

25,541

 

Gain on sale of assets, net

 

(498

)

 

 

(3,975

)

Total operating expenses

 

962,354

 

 

 

1,074,060

 

 

 

 

 

 

 

Operating income

 

37,139

 

 

 

78,205

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest expense

 

(3,899

)

 

 

(2,970

)

Interest income

 

1,393

 

 

 

1,377

 

Other, net

 

(170

)

 

 

38

 

Total other expense, net

 

(2,676

)

 

 

(1,555

)

 

 

 

 

 

 

Income before provision for income taxes

 

34,463

 

 

 

76,650

 

 

 

 

 

 

 

Provision for income taxes

 

7,410

 

 

 

14,870

 

 

 

 

 

 

 

Net income

 

27,053

 

 

 

61,780

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

Foreign currency translation adjustments

 

(8

)

 

 

34

 

 

 

 

 

 

 

Total comprehensive income

$

27,045

 

 

$

61,814

 

 

 

 

 

 

 

Basic earnings per common share

$

0.44

 

 

$

0.95

 

 

 

 

 

 

 

Diluted earnings per common share

$

0.44

 

 

$

0.94

 

 

 

 

 

 

 

Basic weighted average number of shares outstanding

 

61,325

 

 

 

65,098

 

Diluted weighted average number of shares outstanding

 

61,666

 

 

 

65,676

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

4


 

HUB GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A & B

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Other

 

 

Treasury

 

 

 

 

 

Shares

 

 

 

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Stock

 

 

 

 

 

Issued

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income

 

 

Shares

 

 

Amount

 

 

Total

 

Balance December 31, 2022

 

76,099,092

 

 

$

761

 

 

$

192,365

 

 

$

1,781,582

 

 

$

(214

)

 

 

(9,656,044

)

 

$

(374,892

)

 

$

1,599,602

 

Stock tendered for payments of withholding taxes related to awards vested

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(191,028

)

 

 

(7,606

)

 

 

(7,606

)

Issuance of restricted stock awards, net of forfeitures

 

-

 

 

 

-

 

 

 

(7,292

)

 

 

-

 

 

 

-

 

 

 

419,056

 

 

 

7,292

 

 

 

-

 

Share-based compensation expense

 

-

 

 

 

-

 

 

 

5,238

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,238

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

61,780

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

61,780

 

Foreign currency translation adjustment

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

34

 

 

 

-

 

 

 

-

 

 

 

34

 

Balance March 31, 2023

 

76,099,092

 

 

$

761

 

 

$

190,311

 

 

$

1,843,362

 

 

$

(180

)

 

 

(9,428,016

)

 

$

(375,206

)

 

$

1,659,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2023

 

76,099,092

 

 

$

761

 

 

$

209,830

 

 

$

1,949,110

 

 

$

(129

)

 

 

(13,323,268

)

 

$

(524,927

)

 

$

1,634,645

 

Adjustment related to stock split

 

(3,220,961

)

 

 

(32

)

 

 

32

 

 

 

-

 

 

 

-

 

 

 

3,220,961

 

 

 

-

 

 

 

-

 

Stock tendered for payments of withholding taxes related to awards vested

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(186,067

)

 

 

(8,486

)

 

 

(8,486

)

Purchase of treasury stock

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(587,928

)

 

 

(25,756

)

 

 

(25,756

)

Federal excise tax on purchased treasury stock

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,470

)

 

 

(1,470

)

Issuance of restricted stock awards, net of forfeitures

 

-

 

 

 

-

 

 

 

(4,938

)

 

 

-

 

 

 

-

 

 

 

420,518

 

 

 

4,938

 

 

 

-

 

Share-based compensation expense

 

-

 

 

 

-

 

 

 

4,040

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,040

 

Dividends paid

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,626

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,626

)

Dividends accrued

 

-

 

 

 

-

 

 

 

-

 

 

 

(176

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(176

)

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

27,053

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27,053

 

Foreign currency translation adjustment

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8

)

 

 

-

 

 

 

-

 

 

 

(8

)

Balance March 31, 2024

 

72,878,131

 

 

$

729

 

 

$

208,964

 

 

$

1,968,361

 

 

$

(137

)

 

 

(10,455,784

)

 

$

(555,701

)

 

$

1,622,216

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

5


 

HUB GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

    Net income

$

27,053

 

 

$

61,780

 

    Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization of intangibles and right-of-use assets

 

49,605

 

 

 

45,810

 

Deferred taxes

 

(3,025

)

 

 

4,901

 

Non-cash share-based compensation expense

 

4,040

 

 

 

5,238

 

Gain on sale of assets, net

 

(498

)

 

 

(3,975

)

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

Restricted investments

 

370

 

 

 

(1,122

)

Accounts receivable, net

 

9,652

 

 

 

18,951

 

Prepaid taxes

 

7,253

 

 

 

7,605

 

Prepaid expenses and other current assets

 

12,468

 

 

 

13,617

 

Other non-current assets

 

(880

)

 

 

(653

)

Accounts payable

 

(24,755

)

 

 

(17,705

)

Accrued expenses

 

11,462

 

 

 

(40,065

)

Non-current liabilities

 

(12,229

)

 

 

(5,007

)

            Net cash provided by operating activities

 

80,516

 

 

 

89,375

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

   Proceeds from sale of equipment

 

3,442

 

 

 

10,172

 

   Purchases of property and equipment

 

(17,524

)

 

 

(26,845

)

   Acquisitions, net of cash acquired

 

-

 

 

 

108

 

            Net cash used in investing activities

 

(14,082

)

 

 

(16,565

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

   Repayments of long-term debt

 

(27,422

)

 

 

(29,237

)

   Purchase of treasury stock

 

(25,756

)

 

 

-

 

   Stock withheld for payments of withholding taxes

 

(8,486

)

 

 

(7,606

)

   Dividends paid

 

(7,626

)

 

 

-

 

   Finance lease payments

 

(606

)

 

 

(888

)

   Proceeds from issuance of debt

 

11,550

 

 

 

20,831

 

            Net cash used in financing activities

 

(58,346

)

 

 

(16,900

)

 

 

 

 

 

 

 

 

 

 

 

 

   Effect of exchange rate changes on cash and cash equivalents

 

4

 

 

 

18

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

8,092

 

 

 

55,928

 

Cash and cash equivalents beginning of the period

 

187,270

 

 

 

286,642

 

Cash and cash equivalents end of the period

$

195,362

 

 

$

342,570

 

 

 

 

 

 

 

Supplemental disclosures of cash flow:

 

 

 

 

 

     Interest paid

$

3,983

 

 

$

3,320

 

     Income taxes (received) paid

$

(1,442

)

 

$

1,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

6


 

HUB GROUP, INC.

NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1. Interim Financial Statements

Our accompanying unaudited condensed consolidated financial statements of Hub Group, Inc. (the “Company,” “Hub,” “we,” “us” or “our”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been omitted pursuant to those rules and regulations. However, we believe that the disclosures contained herein are adequate to make the information presented not misleading.

The financial statements reflect, in our opinion, all material adjustments (which include only normal recurring adjustments) necessary to fairly present our financial position as of March 31, 2024 and results of operations for the three months ended March 31, 2024 and 2023.

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the condensed consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”). Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

 

On January 4, 2024, the Company announced a two-for-one stock split of the Company’s Class A and Class B common stock. The stock split was implemented in the form of a distribution of one additional Class A share for each share outstanding. The record date for the stock split was as of the close of business on January 16, 2024. The Company distribution date of the additional shares was January 26, 2024. As a result of the stock split, the number of authorized shares remained unchanged. Additionally, the par value per share of the common stock remains unchanged. All other share amounts in our condensed consolidated balance sheets, condensed consolidated statements of income and comprehensive income, condensed consolidated statements of stockholders' equity and related footnote disclosures have been adjusted and presented as though the stock split had occurred as of the earliest period presented.

 

On February 22, 2024, the Board declared a quarterly cash dividend of $0.125 per share on the Company’s Class A and Class B common stock. The dividend was paid on March 27, 2024 to stockholders of record as of March 8, 2024. The declaration and payment of the quarterly cash dividend was subject to the approval of the Board at its sole discretion and in compliance with applicable laws and regulations.

In October 2023, the Board authorized the purchase of up to $250 million of our Class A Common Stock pursuant to a share repurchase program. During the three months ended March 31, 2024, we purchased 587,928 shares for approximately $26 million.

Due to presentation changes made in our condensed consolidated statement of shareholders' equity, certain prior year amounts have been reclassified to conform with the current year presentation.

 

 

NOTE 2. Earnings Per Share

The following is a reconciliation of our earnings per share (in thousands, except for per share data):

 

 

Three Months Ended, March 31,

 

 

2024

 

 

2023

 

 

 

 

 

 

 

Net income for basic and diluted earnings per share

$

27,053

 

 

$

61,780

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

61,325

 

 

 

65,098

 

 

 

 

 

 

 

Dilutive effect of restricted stock

 

341

 

 

 

578

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

61,666

 

 

 

65,676

 

 

 

 

 

 

 

Earnings per share - basic

$

0.44

 

 

$

0.95

 

 

 

 

 

 

 

Earnings per share - diluted

$

0.44

 

 

$

0.94

 

 

7


 

 

NOTE 3. Acquisitions

 

Forward Air Final Mile Acquisition

 

On December 20, 2023, we acquired 100% of the equity interest of Forward Air Final Mile (“FAFM”). FAFM provides residential last mile delivery services and installation of big and bulky goods, with a focus on appliances, throughout the United States. Total consideration for the transaction was $261 million paid from cash on hand. The financial results of FAFM, since the date of acquisition, are included in our Logistics segment.

 

The FAFM acquisition expanded our final mile services to include the delivery and installation of appliances. FAFM provides residential last mile delivery services through a non-asset business model, working with a network of over 350 carriers throughout the country.

 

The initial accounting for the acquisition of FAFM is incomplete as we, with the support of our valuation specialist, are in the process of finalizing the fair market value calculations of the acquired net assets. In addition, the Company is in the process of preparing and reviewing the applicable future cash flows used in determining the purchase accounting. Finally, certain post-closing activities outlined in the acquisition agreement remain incomplete. As a result, the amounts recorded in the condensed consolidated financial statements related to the FAFM acquisition are preliminary and the measurement period remains open.

 

The following table summarizes the preliminary allocation of the total consideration to the assets acquired and liabilities assumed as of the date of the acquisition (in thousands):

 

 

December 20, 2023

 

Accounts receivable trade

$

28,574

 

Prepaid expenses and other current assets

 

2,305

 

Property and equipment

 

2,793

 

Right-of-use assets - operating leases

 

15,003

 

Other intangibles

 

134,456

 

Goodwill

 

105,687

 

Other assets

 

173

 

Total assets acquired

$

288,991

 

 

 

 

Accounts payable trade

$

155

 

Accounts payable other

 

2,177

 

Accrued payroll

 

1,271

 

Accrued other

 

9,449

 

Lease liability - operating leases short-term

 

6,145

 

Other long-term liabilities

 

19

 

Lease liability - operating leases long-term

 

8,857

 

Total liabilities assumed

$

28,073

 

 

 

 

Total consideration

$

260,918

 

 

 

 

Cash paid

$

260,918

 

 

The FAFM acquisition was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded in the accompanying condensed consolidated balance sheet at their estimated fair values as of December 20, 2023 with the remaining unallocated purchase price recorded as goodwill. The goodwill recognized in the FAFM acquisition was primarily attributable to potential expansion and future development of the acquired business.

Tax history and attributes are not inherited in an equity purchase of this kind, however, the goodwill and other intangibles recognized in this purchase will be fully tax deductible over a period of 15 years.

 

The components of “Other intangibles” listed in the above table as of the acquisition date are preliminarily estimated based on prior final mile acquisitions as follows (in thousands):

 

8


 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

Accumulated

 

 

Balance at

 

Useful

 

Amount

 

 

Amortization

 

 

March 31, 2024

 

Life

Customer relationships

$

127,733

 

 

$

2,484

 

 

$

125,249

 

15 years

Developed technology

$

6,723

 

 

$

490

 

 

$

6,233

 

4 years

 

 

The above intangible assets are amortized using the straight-line method. Amortization expense related to this acquisition for the three months ended March 31, 2024 was $2.5 million. The intangible assets have a remaining weighted average useful life of approximately 14.15 years.


 

Amortization expense related to FAFM for the next five years is as follows (in thousands):

 

 

Total

 

2024 (Remainder of year)

$

7,647

 

2025

 

10,196

 

2026

 

10,196

 

2027

 

10,126

 

2028

 

8,516

 

 

FAFM's actual results are included in our condensed consolidated financial statements since the acquisition date of December 20, 2023. The following unaudited pro forma condensed consolidated results of operations present the effects of FAFM as though it had been acquired as of January 1, 2023 (in thousands, except for per share amounts):

 

 

Three Months Ended

 

 

March 31, 2023

 

Revenue

$

1,221,622

 

Net income

$

61,814

 

Earnings per share

 

 

Basic

$

0.95

 

Diluted

$

0.94

 

 

 

The unaudited pro forma condensed consolidated results for the annual periods were prepared using the acquisition method of accounting and are based on the historical financial information of Hub and FAFM. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma condensed consolidated results are not necessarily indicative of what our condensed consolidated results of operations actually would have been had we completed the FAFM acquisition as of January 1, 2023.

 

NOTE 4. Segment Reporting

 

We have two reportable segments: Intermodal and Transportation Solutions (“ITS”) and Logistics which are based primarily on the services each segment provides. Our ITS segment includes our asset-light business lines: intermodal and dedicated trucking. Our Logistics segment includes our non-asset business lines: managed transportation, truck brokerage, final mile, consolidation, warehousing and fulfillment.

 

Intermodal and Transportation Solutions. Our Intermodal and Transportation Solutions segment offers high service, nationwide door-to-door intermodal transportation, providing value, visibility and reliability in both transcontinental and local lanes by combining rail transportation with local trucking. This segment includes our trucking operations which provides our customers with local pickup and delivery (referred to as “drayage”) as well as high service local and regional trucking transportation using equipment dedicated to their needs. We arrange for the movement of our customers’ freight in one of our approximately 50,000 containers. We contract with railroads to provide transportation for the long-haul portion of the shipment between rail terminals. Drayage between origin or destination and rail terminals are provided by our own trucking operations and third parties with whom we contract. Our dedicated service operation offers fleets of equipment and drivers to each customer on a contract basis, as well as the management and infrastructure to operate according to the customer’s high service expectations. As of March 31, 2024, our trucking transportation operation consisted of approximately 2,300 tractors, 2,900 employee drivers and 4,300 trailers. We also contract for services with approximately 400 independent owner-operators.

9


 

 

Logistics. Our Logistics segment offers a wide range of services including transportation management, freight brokerage services, shipment optimization, load consolidation, mode selection, carrier management, load planning and execution, warehousing, fulfillment, cross-docking, consolidation services and final mile delivery. These services include a full range of trucking transportation services, including dry van, expedited, less-than-truckload, refrigerated and flatbed, all of which is provided by third party carriers with whom we contract. We also leverage proprietary technology along with collaborative relationships with third party service providers to deliver cost savings and performance-enhancing supply chain services to our clients. Our transportation management offering also serves as a source of volume for our ITS segment.

 

The following tables summarize our financial and operating data by segment (in thousands):

 

 

Three Months Ended

 

Operating Revenue

March 31,

 

 

2024

 

 

2023

 

Intermodal and Transportation Solutions

$

552,033

 

 

$

709,249

 

Logistics

 

480,224

 

 

 

469,141

 

Inter-segment eliminations

 

(32,764

)

 

 

(26,125

)

Total operating revenue

$

999,493

 

 

$

1,152,265

 

 

 

 

Three Months Ended

 

Operating Income

March 31,

 

 

2024

 

 

2023

 

Intermodal and Transportation Solutions

$

13,031

 

 

$

49,379

 

Logistics

 

24,108

 

 

 

28,826

 

Total operating income

$

37,139

 

 

$

78,205

 

 

 

 

Three Months Ended

 

Depreciation and Amortization

March 31,

 

 

2024

 

 

2023

 

Intermodal and Transportation Solutions

$

27,049

 

 

$

27,142

 

Logistics

 

11,282

 

 

 

8,307

 

Total depreciation and amortization

$

38,331

 

 

$

35,449

 

 

Separate balance sheets are not presented by segment to our Chief Operating Decision Maker (“CODM”). Our CODM uses consolidated asset information to make capital decisions.

 

NOTE 5. Fair Value Measurement

The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of March 31, 2024 and December 31, 2023. As of March 31, 2024, the fair value of the Company’s fixed-rate borrowings was $3.1 million less than the historical carrying value of $334.8 million. As of December 31, 2023, the fair value of the Company's fixed-rate borrowings was $1.4 million less than the historical carrying value of $350.7 million. The fair value of the fixed-rate borrowings was estimated using an income approach based on current interest rates available to the Company for borrowings on similar terms and maturities.

We consider as cash equivalents all highly liquid instruments with an original maturity of three months or less. As of March 31, 2024 and December 31, 2023, our cash and temporary investments were with high quality financial institutions in demand deposit accounts, savings accounts, checking accounts, certificates of deposits and money market accounts.

Restricted investments included $20.4 million and $20.8 million as of March 31, 2024 and December 31, 2023, respectively, of mutual funds and other security investments which are reported at fair value. These investments relate to our non-qualified deferred compensation plan and insurance deposits.

Our assets and liabilities measured at fair value are based on valuation techniques which consider prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. These valuation methods are based on either quoted market prices (Level 1) or inputs, other than quoted prices in active markets, that are observable either directly or indirectly (Level 2), or unobservable inputs (Level 3). Cash and cash equivalents, accounts receivable, accounts payable and mutual funds and related liabilities are defined as “Level 1,” while long-term debt is defined as “Level 2” of the fair value hierarchy in the Fair Value Measurements and Disclosures Topic of the Codification.

10


 

NOTE 6. Long-Term Debt and Financing Arrangements

In February 2022, we entered into a five-year, $350 million unsecured credit agreement (the "Credit Agreement"). Borrowings under the Credit Agreement generally bear interest at a variable rate equal to (i) the secured overnight financing rate (published by the Federal Reserve Bank of New York, “SOFR”), plus a specified margin based on the term of such borrowing, plus a specified margin based upon Hub’s total net leverage ratio (as defined in the Credit Agreement) (the "Total Net Leverage Ratio"), or (ii) the base rate (which is the highest of (a) the administrative agent's prime rate, (b) the federal funds rate plus 0.50% or (c) the sum of 1% and one-month SOFR) plus a specified margin based upon the Total Net Leverage Ratio. The specified margin for SOFR loans varies from 100.0 to 175.0 basis points per annum. The specified margin for base rate loans varies from 0.0 to 75.0 basis points per annum. Hub must also pay (1) a commitment fee ranging from 10.0 to 25.0 basis points per annum (based upon the Total Net Leverage Ratio) on the aggregate unused commitments and (2) a letter of credit fee ranging from 100.0 to 175.0 basis points per annum (based upon the Total Net Leverage Ratio) on the undrawn amount of letters of credit.

We have standby letters of credit that expire in 2024. As of March 31, 2024 and December 31, 2023, our letters of credit were $0.8 and $ 0.9 million, respectively.

As March 31, 2024 and December 31, 2023, we had no borrowings under our Credit Agreement and our unused and available borrowings were $349.2 million and $349.1 million, respectively. We were in compliance with the financial covenants in our debt agreement as of March 31, 2024 and December 31, 2023.

We have entered into various Equipment Notes (“Notes”) for the purchase of tractors, trailers, containers and refrigeration units. The Notes are secured by the underlying equipment financed in the agreements.

Our outstanding Notes are as follows (in thousands):

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

 

 

 

 

 

 

Interim funding for equipment received and expected to be converted to an equipment note in a subsequent period; interest paid at a variable rate

$

707

 

 

$

3,265

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2029 commencing on various dates in 2024; interest is paid monthly at a fixed annual rate between 5.73% and 6.14%

 

14,106

 

 

 

-

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2028 commencing on various dates in 2023; interest is paid monthly at a fixed annual rate between 5.21% and 6.32%

 

100,180

 

 

 

105,744

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2027 commencing on various dates in 2022 and 2023; interest is paid monthly at a fixed annual rate between 2.07% and 6.45%

 

137,746

 

 

 

147,192

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2026 commencing on various dates in 2021; interest is paid monthly at a fixed annual rate between 1.48% and 2.41%

 

52,804

 

 

 

55,797

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2025 commencing on various dates in 2020; interest is paid monthly at a fixed annual rate between 1.51% and 1.80%

 

24,827

 

 

 

30,930

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2024 commencing on various dates in 2017, 2019 and 2020; interest is paid monthly at a fixed annual rate between 2.58% and 3.40%

 

4,440

 

 

 

7,754

 

 

 

 

 

 

 

Total debt

 

334,810

 

 

 

350,682

 

 

 

 

 

 

 

Less current portion of long-term debt

 

(104,035

)

 

 

(105,108

)

Total long-term debt

$

230,775

 

 

$

245,574

 

 

NOTE 7. Legal Matters

 

The Company is involved in certain claims and pending litigation arising from the normal conduct of business, including putative class-action lawsuits involving employment related claims. Based on management's present knowledge, management does not believe that any potential unrecorded loss contingencies arising from these pending matters are likely to have a material adverse effect on the Company's overall financial position, operating results, or cash flows after taking into account any existing accruals for settlements or losses determined to be probable and estimable. However, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period.

11


 

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Information

 

Statements in this section and other parts of this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements, provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that might cause the actual performance of the Company to differ materially from those expressed or implied by this discussion and, therefore, should be viewed with caution. Further information on the risks that may affect the Company’s business is included in filings it makes with the SEC from time to time, including those discussed under the “Risk Factors” section in the 2023 10-K and subsequent filings. The Company assumes no obligation to update any such forward-looking statements.

EXECUTIVE SUMMARY

 

We are a leading supply chain solutions provider in North America that offers comprehensive transportation and logistics management services focused on reliability, visibility and value for our customers. Our service offerings include a full range of freight transportation and logistics services, some of which are provided by assets we own and operate, and some of which are provided by third parties with whom we contract. Our services include intermodal, truckload, less-than-truckload, flatbed, temperature-controlled, dedicated and regional trucking. Other services include full outsource logistics solutions, transportation management services, freight consolidation, warehousing and fulfillment, final mile delivery, parcel and international services.

 

We service a large and diversified customer base in a broad range of industries, including retail, consumer products and durable goods. We believe our strategy to offer multi-modal supply chain management solutions serves to strengthen and deepen our relationships with our customers and allows us to provide a more cost effective and higher service solution.

 

Intermodal and Transportation Solutions. Our Intermodal and Transportation Solutions segment offers high service, nationwide door-to-door intermodal transportation, providing value, visibility and reliability in both transcontinental and local lanes by combining rail transportation with local trucking. This segment includes our trucking operations which provides our customers with local pickup and delivery as well as high service local and regional trucking transportation using equipment dedicated to their needs. In the first quarter of 2024, approximately 77% of our drayage services was provided by our own fleet. We arrange for the movement of our customers’ freight in one of our approximately 50,000 containers. We contract with railroads to provide transportation for the long-haul portion of the shipment between rail terminals. Drayage between origin or destination and rail terminals are provided by our own trucking operations and third parties with whom we contract. Our dedicated service operation offers fleets of equipment and drivers to each customer on a contract basis, as well as the management and infrastructure to operate according to the customer’s high service expectations. As of March 31, 2024, our trucking transportation operation consisted of approximately 2,300 tractors, 2,900 employee drivers and 4,300 trailers. We also contract for services with approximately 400 independent owner-operators. These assets and contractual services are used to support drayage for our intermodal service offering and to serve our customers who require high service local and regional trucking transportation using equipment dedicated to their needs. Our dedicated service operation offers fleets of equipment and drivers to each customer on a contract basis, as well as the management and infrastructure to operate according to the customer’s high service expectations.

 

Logistics. Our Logistics segment offers a wide range of non-asset-based services including transportation management, freight brokerage services, shipment optimization, load consolidation, mode selection, carrier management, load planning and execution, warehousing, fulfillment, cross-docking, consolidation services and final mile delivery. Logistics includes our brokerage business which consists of a full range of trucking transportation services, including dry van, expedited, less-than-truckload (“LTL”), refrigerated and flatbed, all of which is provided by third-party carriers with whom we contract. We leverage proprietary technology along with collaborative relationships with third-party service providers to deliver cost savings and performance-enhancing supply chain services to our clients. Our transportation management offering also serves as a source of volume for our ITS segment. Many of the customers for these solutions are consumer goods companies who sell into the retail channel. Our final mile delivery offering provides residential final mile delivery and installation of appliances and big and bulky goods. Final mile operates through a network of independent service providers in company, customer and third-party facilities throughout the continental United States. Our business operates or has access to approximately 11 million square feet of warehousing and cross-dock space across North America, to which our customers ship their goods to be stored and distributed to destinations including residences, retail stores and other commercial locations. These services offer our customers shipment visibility, transportation cost savings, high service and compliance with retailers’ increasingly stringent supply chain requirements.

 

12


 

On December 20, 2023, we acquired 100% of the equity interests of Forward Air Final Mile (“FAFM”). Total consideration for the transaction was approximately $261 million in cash.

 

We are focused on several margin enhancement projects including network optimization, matching of inbound and outbound loads, reducing empty miles, improving our recovery of accessorial costs, increasing our driver and asset utilization, reducing repositioning costs, providing holistic solutions and improving low profit freight. Hub’s top 50 customers represent approximately 71% of revenue for the three months ended March 31, 2024, while one customer accounted for more than 10% of our quarterly revenue in both segments in both 2024 and 2023. We use various performance indicators to manage our business. We closely monitor operating cash flow, profit levels for our top customers, daily sales outstanding by customer account and vendor cost changes. On-time performance, customer service, cost per load and vendor service levels are also monitored closely.

 

The following table includes the one customer that represented 10% or more of our quarterly revenue by segment for the three months ending March 31, 2024 and 2023, respectively:

 

 

Three Months Ended

Customer A

March 31,

 

2024

 

2023

ITS

19%

 

17%

Logistics

15%

 

10%

Total operating revenue

18%

 

14%

 

 

Uncertainties and risks to our outlook include inflation, increased healthcare costs, a slowdown in consumer spending (driven by, among other factors, inflation, increases in interest rates, an economic recession and geopolitical concerns), a shift by consumers to spending on services at the expense of goods, an increase of retailers’ inventory levels, the ability of customers to pay our accounts receivable, a significant increase in transportation supply in the marketplace, aggressive pricing actions by our competitors and any inability to pass cost increases, such as transportation and warehouse costs, through to our customers, all of which could have a materially negative impact on our revenue, profitability and cash flow in 2024. Exiting of truckload capacity, retail inventory levels declining leading to restocking demand, a return of typical shipping peak season demands and a stronger used tractor market could have a materially positive impact on our revenue, profitability and cash flows in 2024.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

The following table summarizes our operating revenue by segment (in thousands):

 

 

Three Months Ended

 

Operating Revenue

March 31,

 

 

2024

 

 

2023

 

Intermodal and Transportation Solutions

$

552,033

 

 

$

709,249

 

Logistics

 

480,224

 

 

 

469,141

 

Inter-segment eliminations

 

(32,764

)

 

 

(26,125

)

Total operating revenue

$

999,493

 

 

$

1,152,265

 

 

 

Three Months Ended

 

Operating Income

March 31,

 

 

2024

 

 

2023

 

Intermodal and Transportation Solutions

$

13,031

 

 

$

49,379

 

Logistics

 

24,108

 

 

 

28,826

 

Total operating income

$

37,139

 

 

$

78,205

 

Operating Revenue and Operating Income

Total consolidated operating revenue decreased 13% to $999 million in 2024 from $1,152 million in 2023.

 

Intermodal and Transportation Solutions (“ITS”) revenue decreased 22% to $552 million primarily due to a 16% decrease in intermodal revenue per load (primarily due to lower fuel revenue, lower accessorial revenue, price declines and mix), a 10% decline in intermodal volume due to lower transportation demand, partially offset by a 1% increase in dedicated revenue resulting from growth of existing customers. ITS operating income decreased to $13 million, 2.4% of revenue, as compared to $49 million, 7.0% of revenue, in

13


 

the prior year due lower customer rates, lower accessorial revenue, and lower volume. These headwinds were partially offset by lower drayage costs, lower equipment costs and lower accessorial costs.

Logistics revenue increased 2% to $480 million primarily due to the recent acquisition in final mile, partially offset by lower revenue in our brokerage service line and consolidation and fulfillment service lines. Brokerage revenue per load declined 17% due to lower pricing, fuel and customer mix partially offset by 1% growth in volume. Logistics operating income decreased to $24 million, 5.0% of revenue, as compared to $29 million, 6.1% of revenue, due to lower brokerage margins partially offset by our recent acquisition in final mile.

 

The following is a summary of operating results and certain items in the condensed consolidated statements of income as a percentage of revenue:

 

 

Three Months Ended

 

March 31,

 

2024

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

Operating revenue

$

999,493

 

100.0%

 

$

1,152,265

 

100.0%

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Purchased transportation and warehousing

 

740,172

 

74.1%

 

 

866,931

 

75.2%

Salaries and benefits

 

144,497

 

14.4%

 

 

137,431

 

11.9%

Depreciation and amortization

 

38,331

 

3.8%

 

 

35,449

 

3.1%

Insurance and claims

 

12,618

 

1.3%

 

 

12,683

 

1.1%

General and administrative

 

27,234

 

2.7%

 

 

25,541

 

2.2%

Gain on sale of assets, net

 

(498

)

0.0%

 

 

(3,975

)

0.3%

Total operating expenses

 

962,354

 

96.3%

 

 

1,074,060

 

93.2%

 

 

 

 

 

 

 

 

Operating income

 

37,139

 

3.7%

 

 

78,205

 

6.8%

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense

 

(3,899

)

-0.4%

 

 

(2,970

)

-0.2%

Interest income

 

1,393

 

0.1%

 

 

1,377

 

0.1%

Other, net

 

(170

)

0.0%

 

 

38

 

0.0%

Total other expense, net

 

(2,676

)

-0.3%

 

 

(1,555

)

-0.1%

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

34,463

 

3.4%

 

 

76,650

 

6.7%

 

 

 

 

 

 

 

 

Provision for income taxes

 

7,410

 

0.7%

 

 

14,870

 

1.3%

 

 

 

 

 

 

 

 

Net income

$

27,053